IMPORTANT POINT
An arbitral award is equated to a decree for enforcement but is not subject to stamp duty under the Karnataka Stamp Act, as it does not pertain to tangible property.

ORDER :

1. The petitioner, a financial institution, entered into a loan agreement with respondents No. 1 and 2. When a dispute arose from the agreement and the respondents failed to repay the loan amount, the petitioner was compelled to initiate arbitration proceedings as outlined in the loan agreement. Although the loan agreement was executed within the jurisdiction of the State of Karnataka in accordance with the Karnataka Stamp Act, 1957, the terms of the agreement specified that the place of arbitration would be in Mumbai. The learned Arbitrator conducted the arbitration proceedings in Mumbai and subsequently issued an award dated 08.06.2011, directing the respondents, jointly and severally, to pay the petitioner a sum of Rs.1,19,678.

2. The petitioner filed Ex. No. 2830/2011 before the learned XIX Additional City Civil and Sessions Judge, Bangalore City, to execute the award. Upon presentation, the office raised an objection regarding the payment of stamp duty on the award amount. The executing Court upheld this office objection and directed the petitioner to pay stamp duty of Rs.7,181 on the award amount, as per the order dated 24.04.2013. Taking exception to this order, the petitioner has filed the present petition.

3. Shri Aditya Sondhi, learned Senior Counsel representing the petitioner, argues that since the arbitral proceedings have been concluded with the issuance of an arbitral award for which execution is sought, the petitioner is not liable to pay the stamp duty as ordered by the executing Court. He contends that the final award should be construed as a decree and enforced under the Civil Procedure Code in the same manner as if it were a court decree. In support of this argument, he relies on the decisions of the Hon'ble Supreme Court in Sundaram Finance Limited, Represented by J. Thilak, Senior Manager (Legal) vs. Abdul Samad and Another, (2018) 3 SCC 622 and the Kerala High Court in Maharashtra Apex Corporation Ltd. vs. Balaji G. & Anr. 2011 SCC Online Ker 4039.

4. In response, the learned Additional Government Advocate for the State submits that an arbitral award in writing is subject to stamp duty when it is executed within the territories of the State of Karnataka. Under Article 11 of the Schedule to the Karnataka Stamp Act, 1957, the arbitral award is liable for stamp duty, except for awards related to certain specified purposes. Therefore, the impugned order passed by the executing Court is in conformity with the law.

5. Heard the arguments advanced by the learned counsel for the parties.

6. The agreement between the petitioner and respondents No. 1 and 2 was made in Karnataka. According to the agreement, the arbitration took place in Mumbai. The arbitration proceedings were held and completed in Mumbai, and the award was stamped with a Rs. 100 non-judicial stamp according to the Bombay Stamp Act, 1958. Although the award was issued in Mumbai, it was brought to Karnataka for enforcement. The Hon'ble Supreme Court in the case of Sundaram Finance Limited v. Abdul Samad and Anr. (2018) 3 SCC 622 has ruled in Paras 18 and 19, which read as follows:

“18. It is in this context that the view adopted by the Delhi High Court in Daelim Industrial Co. Ltd. v. Numaligarh Refinery Ltd. 2009 SCC Online Del 511 : (2009) 159 DLT 579 records that Section 42 of the Act would not apply to an execution application, which is not an arbitral proceeding, and that Section 38 of the Code would apply to a decree passed by the court. However, in the case of an award, no court has passed the decree.

19. The Madras High Court in Kotak Mahindra Bank Ltd. v. Sivakama Sundari, 2011 SCC Online Mad 1290 : (2011) 4 LW 745 referred to Section 46 of the said Code, which spoke of precepts but stopped at that. In the context of the Code, thus, the view adopted is that the decree of a civil court is liable to be executed primarily by the court, which passes the decree where an execution application has to be filed at the first instance. An award under